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Friday, April 21, 2017

21/4/17: Millennials, Property ‘Ladders’ and Defaults

In a recent report, titled “Beyond the Bricks: The meaning of home”, HSBC lauded the virtues of the millennials in actively pursuing purchases of homes. Mind you - keep in mind the official definition of the millennials as someone born 1981 and 1998, or 28-36 years of age (the age when one is normally quite likely to acquire a mortgage and their first property).

So here are the HSBC stats:

As the above clearly shows, there is quite a range of variation across the geographies in terms of millennials propensity to purchase a house. However, two things jump out:

Current generation is well behind the baby boomers (when the same age groups are taken for comparatives) in terms of home ownership in all advanced economies; and

Millennials are finding it harder to purchase homes in the countries where homeownership is seen as the basic first step on the investment and savings ladder to the upper middle class (USA, Canada, UK and Australia).

All of which suggests that the millennials are severely lagging previous generations in terms of both savings and investment. This is especially true as the issues relating to preferences (as opposed to affordability) are clearly not at play here (see the gap between ‘ownership’ and intent to own).

That point - made above - concerning the lack of evidence that millennials are not purchasing homes because their preferences might have shifted in favour of renting and way from owning is also supported by a sky-high proportions of millennials who go to such lengths as borrow from parents and live with parents to save for the deposit on the house:

Disclaimer

This blog represents my personal views and is not reflective of the views or opinions held by any company, contractor, client or employer I work for currently or have worked for in the past. These views are not an endorsement to take any action in the markets or of any political position, figures or parties.

“It is not true that people stop pursuing dreams because they grow old, they grow old because they stop pursuing dreams.” Gabriel Garcí­a Márquez

Nassim Nicholas Taleb was asked whether public protests in Athens is a Black Swan Event. He replied: “No. The real Black Swan Event is that people are not rioting against the banks in London and New York.”

"Getting worse more slowly is not the same as getting better", Prof. Brad DeLong